{"id":168,"date":"2017-02-05T00:30:39","date_gmt":"2017-02-05T05:30:39","guid":{"rendered":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/?post_type=chapter&#038;p=168"},"modified":"2017-12-04T00:38:47","modified_gmt":"2017-12-04T05:38:47","slug":"7-2-the-structure-of-costs-in-the-short-run","status":"publish","type":"chapter","link":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/chapter\/7-2-the-structure-of-costs-in-the-short-run\/","title":{"raw":"7.2 Understanding Producer Theory","rendered":"7.2 Understanding Producer Theory"},"content":{"raw":"<div class=\"bcc-box bcc-highlight\">\r\n<h3 itemprop=\"educationalUse\">Learning Objectives<\/h3>\r\nBy the end of this section, you will be able to:\r\n<ul>\r\n \t<li>Calculate\u00a0fixed costs, producer theory, and profits.<\/li>\r\n \t<li>Identify\u00a0when firms will exit in the short-run.<\/li>\r\n \t<li>Be able to identify break-even and shut-down points.<\/li>\r\n<\/ul>\r\n<\/div>\r\nNow that we have built our model for Producer Theory, we want to use it as a tool to understand how individual firms behave when faced with different prices. First, let\u2019s see the different variables we can calculate from our graph.\r\n<h2>Fixed Cost<\/h2>\r\n<p style=\"vertical-align: baseline;margin: 0cm 0cm 11.25pt 0cm\"><span style=\"font-family: Georgia;color: black\">In Topic 7.1, we showed that ATC = AVC + AFC. This means that AFC = ATC \u2013 AVC. Since FC = (AFC x Q), on our graph, we can find what total fixed costs are by simply multiplying the difference in AVC and ATC by the quantity at that level [(ATC-AVC) x (Q)].<\/span><\/p>\r\n\r\n\r\n[caption id=\"attachment_1946\" align=\"alignnone\" width=\"519\"]<img src=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.42-PM.png\" width=\"519\" height=\"430\" class=\"wp-image-1946 size-full\" alt=\"\" \/> Figure 7.2a[\/caption]\r\n\r\nAt Q = 50, our ATC = $7 and AVC = $4. Calculating fixed cost, we see it equals $150 [(7-4) x (50)], as stated in Topic 7.1. Remember that we derived ATC using fixed costs. Now, without knowing fixed cost, we can work backwards from our diagram\u00a0to calculate total fixed cost at any Q.\r\n\r\nCalculating FC at any other point, we will find that it is always\u00a0equal to $150. At Q = 150, ATC = $7.5 and AVC = $6.5. [(7.5-6.5) x (150)] = $150. Remember that fixed cost is always equal to $150 regardless of quantity, but AFC is always decreasing, as this $150 gets spread out across more goods.\r\n\r\n[caption id=\"attachment_1947\" align=\"alignnone\" width=\"515\"]<img src=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.48-PM.png\" width=\"515\" height=\"424\" class=\"wp-image-1947 size-full\" alt=\"\" \/> Figure 7.2b[\/caption]\r\n<h1>The Competitive Firm<\/h1>\r\nWhile we will use producer theory for non-competitive markets, for now, we are looking at price-taking firms.\r\n\r\nIf The Clip Joint is operating in a city with many other identical barber shops, they will lose their ability to set prices. A market price will dictate where they produce. We already know how this takes place. In Topic 1, we learned that economic agents use marginal analysis to make decisions about whether to increase a behaviour. If MB &gt; MC, they will increase Q, and stop when MB = MC.\r\n\r\nIn this case, our price is our marginal benefit, since the price the firm receives is equal to the marginal revenue from an action. If price is $7, then every Q will earn the firm $7 of revenue. This means that P = MR = MB.\u00a0Knowing that a firm maximizes producer surplus when MC = MB, we can now see that for a competitive firm, this occurs when P = MC.\r\n<h2>When There's Profits<\/h2>\r\n<p style=\"vertical-align: baseline;margin: 0cm 0cm 11.25pt 0cm\"><span style=\"font-family: Georgia;color: black\">Marginal analysis certainly maximizes producer surplus, but what about profits? Recall that producer surplus does not subtract fixed cost. This means that:<\/span><\/p>\r\n<p style=\"vertical-align: baseline;margin: 0cm 0cm 12.0pt 0cm\"><span style=\"font-family: Georgia;color: black\">PS = TR \u2013 VC = (P \u2013 AVC) \u00d7 Q.<\/span><\/p>\r\n<p style=\"vertical-align: baseline;margin: 0cm 0cm 12.0pt 0cm\"><span style=\"font-family: Georgia;color: black\">\u03a0 = (P \u2013 ATC) \u00d7 Q.<\/span><\/p>\r\n<p style=\"vertical-align: baseline;margin: 0cm 0cm 12.0pt 0cm\"><span style=\"font-family: Georgia;color: black\">The only difference between PS and profit is fixed cost. Even though profits and producer surplus are not the same, the act of maximizing PS maximizes profits as well. Our marginal analysis tells us to increase production if \u2206PS &gt;\u2206VC (MB&gt;MC). Since fixed costs do not change, the \u2206PS = \u2206\u03a0 and the analysis of \u2206 \u03a0 &gt;\u2206VC will be identical.<\/span><\/p>\r\n<p style=\"vertical-align: baseline;margin: 0cm 0cm 12.0pt 0cm\"><span style=\"font-family: Georgia;color: black\">Let\u2019s bring this understanding to our graph. Consider a market where The Clip Joint faces a price of $7.5. Using marginal analysis, we will produce until MC = P, or where our price line intersects our marginal cost. This occurs at Q = 110.<\/span><\/p>\r\n\r\n\r\n[caption id=\"attachment_1948\" align=\"alignnone\" width=\"550\"]<img src=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.53-PM.png\" width=\"550\" height=\"437\" class=\"wp-image-1948 size-full\" alt=\"\" \/> Figure 7.2c[\/caption]\r\n\r\nCalculating profits, with \u03a0 = (P \u2013 ATC) \u00d7 Q, we find \u03a0 = (7.5 \u2013 5.59) x 110 = $210.\r\n\r\n[caption id=\"attachment_1949\" align=\"alignnone\" width=\"531\"]<img src=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.59-PM.png\" width=\"531\" height=\"435\" class=\"wp-image-1949 size-full\" alt=\"\" \/> Figure 7.2d[\/caption]\r\n<p style=\"vertical-align: baseline;margin: 0cm 0cm 12.0pt 0cm\"><span style=\"font-family: Georgia;color: black\">Calculating producer surplus, with PS = (P \u2013 AVC) \u00d7 Q, we find \u03a0 = (7.5 \u2013 4.23) x 110 = $360.<\/span><\/p>\r\n<p style=\"vertical-align: baseline;margin: 0cm 0cm 12.0pt 0cm\"><span style=\"font-family: Georgia;color: black\">Note that our AVC and ATC are always calculated from the quantity where MC = P, as this is the profit maximizing quantity.<\/span><\/p>\r\n<p style=\"vertical-align: baseline;margin: 0cm 0cm 12.0pt 0cm\"><span style=\"font-family: Georgia;color: black\">What is the difference between profits and producer surplus? Calculating $360 - $210, we find our fixed cost value of $150. This is no surprise \u2013 producer surplus is just our earnings before we subtract the fixed costs!<\/span><\/p>\r\n\r\n<h2>When There's Losses<\/h2>\r\n<p style=\"vertical-align: baseline;margin: 0cm 0cm 11.25pt 0cm\"><span style=\"font-family: Georgia;color: black\">In the last example, The Clip Joint made healthy profits of $210 per day because P &gt; ATC. In the long run, this will not be sustainable. In fact, firms will produce in the short-run even when P &lt; ATC and \u03a0 is negative. Consider how The Clip Joint will behave when P = $5.<\/span><\/p>\r\n<p style=\"vertical-align: baseline;margin: 0cm 0cm 12.0pt 0cm\"><span style=\"font-family: Georgia;color: black\">At P = $5, MC = MB when Q = 90. This means ATC = $5.5 and AVC = $3.83.<\/span><\/p>\r\n\r\n\r\n[caption id=\"attachment_1950\" align=\"alignnone\" width=\"535\"]<img src=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.10.05-PM.png\" width=\"535\" height=\"427\" class=\"wp-image-1950 size-full\" alt=\"\" \/> Figure 7.2e[\/caption]\r\n\r\nCalculating profits, with \u03a0 = (P \u2013 ATC) \u00d7 Q, we find \u03a0 = (5.0 \u2013 5.5) x 90 = -$45.\r\n\r\nWhy doesn\u2019t the firm just shut down if it is losing money? Because it could be losing <strong>more<\/strong> money. Remember that no matter how much The Clip Joint produces, it still has to pay $150 in fixed costs. In this case, The Clip Joint will take a loss of $45 over a loss of $150.\r\n\r\nWe can come to the same conclusion by looking at producer surplus.\r\n\r\n[caption id=\"attachment_1951\" align=\"alignnone\" width=\"538\"]<img src=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.10.14-PM.png\" width=\"538\" height=\"440\" class=\"wp-image-1951 size-full\" alt=\"\" \/> Figure 7.3f[\/caption]\r\n\r\nIf PS &gt; 0, then the firm has enough money to pay for all of its variable costs, plus some money left over to pay for its fixed costs. In this case, after paying VC, The Clip Joint has $105 left over to pay off a portion of its fixed costs.\r\n\r\nThis should clear up the relationship between FC, PS, and Profits. Producer Surplus is the amount we have before paying our fixed costs.\r\n\r\nSmart-thinking company presidents do not continue to accept loses in the long run \u2013 that would be bad business. When the lease comes up for renewal, The Clip Joint will shut down knowing that it loses $45 from each day of business. Is there any case where it would shut down immediately in the short run? Yes. In this example, our PS &gt; 0 since P &gt; AVC; this means that even though we are losing money, we are able to pay off some of our FC. What if P &lt; AVC? In this case, our firm would not even be able to pay for its workers, let alone rent and other fixed costs. The more the firm produced, the more money it would lose. In this case, our firm will shut down immediately. For this reason, we call the point where P = AVC<sub>MIN<\/sub>\u00a0the\u00a0<strong>Shut-Down Point<\/strong><strong>. <\/strong>If the price falls any lower, the firm will shut down immediately.\r\n\r\n[caption id=\"attachment_1952\" align=\"alignnone\" width=\"573\"]<img src=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.10.34-PM.png\" width=\"573\" height=\"418\" class=\"wp-image-1952 size-full\" alt=\"\" \/> Figure 7.2g[\/caption]\r\n\r\nAnother important point is the\u00a0<strong>Break-Even Point<\/strong>\u00a0where P = ATC. If the price falls below this, we reach a situation like the example above, where the firm makes negative profits but continues to operate in the short-run.\r\n\r\nWe have now analyzed how an individual firm behaves in the short-run in depth \u2013 but what about the long run? What happens when shocks to the economy cause price to change? We will answer these questions in Topic 7.3.\r\n<div class=\"textbox\">\r\n<h2>Glossary<\/h2>\r\n<dl id=\"fs-idp41787328\" class=\"definition\">\r\n \t<dt><strong>Break-Even Point<\/strong><\/dt>\r\n \t<dd id=\"fs-idp35020496\"><em>A point where a firm is making no profits<\/em><\/dd>\r\n<\/dl>\r\n<dl id=\"fs-idm51600048\" class=\"definition\">\r\n \t<dt><strong>Shut-Down Point<\/strong><\/dt>\r\n \t<dd id=\"fs-idp17805888\"><em>A point where a firm is only able to cover their variable costs of production<\/em><\/dd>\r\n<\/dl>\r\n<\/div>\r\n<div class=\"bcc-box bcc-info\">\r\n<h3 itemprop=\"educationalUse\">Exercises 7.2<\/h3>\r\n<strong>1.<\/strong> Suppose you are given the following information about a competitive firm:\r\n\r\nAt the current quantity produced, P = $10; AVC = $4; AVC is at is minimum.\r\n\r\nGiven this:\r\n\r\na) The firm should continue to produce its current level of output; this is profit maximizing.\r\nb) In order to maximize profits, the firm should increase output.\r\nc) In order to maximize profits, the firm should decrease output.\r\nd) We do not have enough information to determine what the firm should do to maximize profits.\r\n\r\n&nbsp;\r\n\r\n<strong>2.<\/strong> If a firm\u2019s profit equals $600 and its producer surplus equals $1,000, then its fixed costs:\r\n\r\na) Equal $400\r\nb) Equal $600.\r\nc) Equal $1,600.\r\nd) Cannot be determined without further information.\r\n\r\n&nbsp;\r\n\r\nThe following TWO\u00a0questions refer to the diagram below. Assume perfect competition.\r\n\r\n<img src=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-02-13-at-3.43.01-PM.png\" alt=\"\" width=\"492\" height=\"381\" class=\"alignnone size-full wp-image-1339\" \/>\r\n\r\n<strong>3.<\/strong> The firm\u2019s shut-down price is ____.\r\n\r\na) $2.\r\nb) $4.\r\nc) $7.\r\nd) $10.\r\n\r\n&nbsp;\r\n\r\n<strong>4.<\/strong> (Remember to refer to the diagram on the previous page.) The firm\u2019s break-even price is ____.\r\n\r\na) $2.\r\nb) $4.\r\nc) $7.\r\nd) $10.\r\n\r\n&nbsp;\r\n\r\nThe following THREE questions refer to the diagram below, which illustrates a competitive firm\u2019s cost curves.\r\n\r\n<img src=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-02-13-at-3.49.33-PM.png\" alt=\"\" width=\"404\" height=\"284\" class=\"alignnone size-full wp-image-1340\" \/>\r\n\r\n<strong>5.<\/strong> What do this firm\u2019s fixed costs equal?\r\n\r\na) There is insufficient information to calculate the firm\u2019s fixed costs.\r\nb) $50.\r\nc) $30.\r\nd) $20.\r\n\r\n&nbsp;\r\n\r\n<strong>6.<\/strong> (Remember to refer to the diagram on the previous page.) If this firm can sell its output for $10 per unit, then its maximum profit is equal to:\r\n\r\na) $150.\r\nb) $75.\r\nc) $60.\r\nd) $45.\r\n\r\n&nbsp;\r\n\r\n<strong>7.<\/strong> (Remember to refer to the diagram on the previous page.) If this firm can sell its output for $10 per unit, then its maximum producer surplus is equal to:\r\n\r\na) $150.\r\nb) $75.\r\nc) $60.\r\nd) $45.\r\n\r\n&nbsp;\r\n\r\nThe following THREE\u00a0questions refer to the diagram below. Assume perfect competition.\r\n\r\n<img src=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-02-13-at-3.50.07-PM.png\" alt=\"\" width=\"305\" height=\"217\" class=\"alignnone size-full wp-image-1341\" \/>\r\n\r\n<strong>8.<\/strong> Given a price of $18, the profit-maximizing level of output for this firm is:\r\n\r\na) 5.\r\nb) 25.\r\nc) 30.\r\nd) 40.\r\n\r\n&nbsp;\r\n\r\n<strong>9.<\/strong> (Remember to refer to the diagram on the previous page.) Given a price of $18, the firm\u2019s maximum profit is equal to:\r\n\r\na) $360.\r\nb) $240.\r\nc) $180.\r\nd) $0.\r\n\r\n&nbsp;\r\n\r\n<strong>10.<\/strong> (Remember to refer to the diagram on the previous page.) What do this firm\u2019s fixed costs equal?\r\n\r\na) $0\r\nb) $40.\r\nc) $180.\r\nd) There is insufficient information to calculate fixed costs.\r\n\r\n<\/div>","rendered":"<div class=\"bcc-box bcc-highlight\">\n<h3 itemprop=\"educationalUse\">Learning Objectives<\/h3>\n<p>By the end of this section, you will be able to:<\/p>\n<ul>\n<li>Calculate\u00a0fixed costs, producer theory, and profits.<\/li>\n<li>Identify\u00a0when firms will exit in the short-run.<\/li>\n<li>Be able to identify break-even and shut-down points.<\/li>\n<\/ul>\n<\/div>\n<p>Now that we have built our model for Producer Theory, we want to use it as a tool to understand how individual firms behave when faced with different prices. First, let\u2019s see the different variables we can calculate from our graph.<\/p>\n<h2>Fixed Cost<\/h2>\n<p style=\"vertical-align: baseline;margin: 0cm 0cm 11.25pt 0cm\"><span style=\"font-family: Georgia;color: black\">In Topic 7.1, we showed that ATC = AVC + AFC. This means that AFC = ATC \u2013 AVC. Since FC = (AFC x Q), on our graph, we can find what total fixed costs are by simply multiplying the difference in AVC and ATC by the quantity at that level [(ATC-AVC) x (Q)].<\/span><\/p>\n<figure id=\"attachment_1946\" aria-describedby=\"caption-attachment-1946\" style=\"width: 519px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.42-PM.png\" width=\"519\" height=\"430\" class=\"wp-image-1946 size-full\" alt=\"\" srcset=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.42-PM.png 519w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.42-PM-300x249.png 300w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.42-PM-65x54.png 65w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.42-PM-225x186.png 225w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.42-PM-350x290.png 350w\" sizes=\"auto, (max-width: 519px) 100vw, 519px\" \/><figcaption id=\"caption-attachment-1946\" class=\"wp-caption-text\">Figure 7.2a<\/figcaption><\/figure>\n<p>At Q = 50, our ATC = $7 and AVC = $4. Calculating fixed cost, we see it equals $150 [(7-4) x (50)], as stated in Topic 7.1. Remember that we derived ATC using fixed costs. Now, without knowing fixed cost, we can work backwards from our diagram\u00a0to calculate total fixed cost at any Q.<\/p>\n<p>Calculating FC at any other point, we will find that it is always\u00a0equal to $150. At Q = 150, ATC = $7.5 and AVC = $6.5. [(7.5-6.5) x (150)] = $150. Remember that fixed cost is always equal to $150 regardless of quantity, but AFC is always decreasing, as this $150 gets spread out across more goods.<\/p>\n<figure id=\"attachment_1947\" aria-describedby=\"caption-attachment-1947\" style=\"width: 515px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.48-PM.png\" width=\"515\" height=\"424\" class=\"wp-image-1947 size-full\" alt=\"\" srcset=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.48-PM.png 515w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.48-PM-300x247.png 300w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.48-PM-65x54.png 65w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.48-PM-225x185.png 225w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.48-PM-350x288.png 350w\" sizes=\"auto, (max-width: 515px) 100vw, 515px\" \/><figcaption id=\"caption-attachment-1947\" class=\"wp-caption-text\">Figure 7.2b<\/figcaption><\/figure>\n<h1>The Competitive Firm<\/h1>\n<p>While we will use producer theory for non-competitive markets, for now, we are looking at price-taking firms.<\/p>\n<p>If The Clip Joint is operating in a city with many other identical barber shops, they will lose their ability to set prices. A market price will dictate where they produce. We already know how this takes place. In Topic 1, we learned that economic agents use marginal analysis to make decisions about whether to increase a behaviour. If MB &gt; MC, they will increase Q, and stop when MB = MC.<\/p>\n<p>In this case, our price is our marginal benefit, since the price the firm receives is equal to the marginal revenue from an action. If price is $7, then every Q will earn the firm $7 of revenue. This means that P = MR = MB.\u00a0Knowing that a firm maximizes producer surplus when MC = MB, we can now see that for a competitive firm, this occurs when P = MC.<\/p>\n<h2>When There&#8217;s Profits<\/h2>\n<p style=\"vertical-align: baseline;margin: 0cm 0cm 11.25pt 0cm\"><span style=\"font-family: Georgia;color: black\">Marginal analysis certainly maximizes producer surplus, but what about profits? Recall that producer surplus does not subtract fixed cost. This means that:<\/span><\/p>\n<p style=\"vertical-align: baseline;margin: 0cm 0cm 12.0pt 0cm\"><span style=\"font-family: Georgia;color: black\">PS = TR \u2013 VC = (P \u2013 AVC) \u00d7 Q.<\/span><\/p>\n<p style=\"vertical-align: baseline;margin: 0cm 0cm 12.0pt 0cm\"><span style=\"font-family: Georgia;color: black\">\u03a0 = (P \u2013 ATC) \u00d7 Q.<\/span><\/p>\n<p style=\"vertical-align: baseline;margin: 0cm 0cm 12.0pt 0cm\"><span style=\"font-family: Georgia;color: black\">The only difference between PS and profit is fixed cost. Even though profits and producer surplus are not the same, the act of maximizing PS maximizes profits as well. Our marginal analysis tells us to increase production if \u2206PS &gt;\u2206VC (MB&gt;MC). Since fixed costs do not change, the \u2206PS = \u2206\u03a0 and the analysis of \u2206 \u03a0 &gt;\u2206VC will be identical.<\/span><\/p>\n<p style=\"vertical-align: baseline;margin: 0cm 0cm 12.0pt 0cm\"><span style=\"font-family: Georgia;color: black\">Let\u2019s bring this understanding to our graph. Consider a market where The Clip Joint faces a price of $7.5. Using marginal analysis, we will produce until MC = P, or where our price line intersects our marginal cost. This occurs at Q = 110.<\/span><\/p>\n<figure id=\"attachment_1948\" aria-describedby=\"caption-attachment-1948\" style=\"width: 550px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.53-PM.png\" width=\"550\" height=\"437\" class=\"wp-image-1948 size-full\" alt=\"\" srcset=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.53-PM.png 550w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.53-PM-300x238.png 300w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.53-PM-65x52.png 65w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.53-PM-225x179.png 225w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.53-PM-350x278.png 350w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><figcaption id=\"caption-attachment-1948\" class=\"wp-caption-text\">Figure 7.2c<\/figcaption><\/figure>\n<p>Calculating profits, with \u03a0 = (P \u2013 ATC) \u00d7 Q, we find \u03a0 = (7.5 \u2013 5.59) x 110 = $210.<\/p>\n<figure id=\"attachment_1949\" aria-describedby=\"caption-attachment-1949\" style=\"width: 531px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.59-PM.png\" width=\"531\" height=\"435\" class=\"wp-image-1949 size-full\" alt=\"\" srcset=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.59-PM.png 531w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.59-PM-300x246.png 300w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.59-PM-65x53.png 65w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.59-PM-225x184.png 225w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.09.59-PM-350x287.png 350w\" sizes=\"auto, (max-width: 531px) 100vw, 531px\" \/><figcaption id=\"caption-attachment-1949\" class=\"wp-caption-text\">Figure 7.2d<\/figcaption><\/figure>\n<p style=\"vertical-align: baseline;margin: 0cm 0cm 12.0pt 0cm\"><span style=\"font-family: Georgia;color: black\">Calculating producer surplus, with PS = (P \u2013 AVC) \u00d7 Q, we find \u03a0 = (7.5 \u2013 4.23) x 110 = $360.<\/span><\/p>\n<p style=\"vertical-align: baseline;margin: 0cm 0cm 12.0pt 0cm\"><span style=\"font-family: Georgia;color: black\">Note that our AVC and ATC are always calculated from the quantity where MC = P, as this is the profit maximizing quantity.<\/span><\/p>\n<p style=\"vertical-align: baseline;margin: 0cm 0cm 12.0pt 0cm\"><span style=\"font-family: Georgia;color: black\">What is the difference between profits and producer surplus? Calculating $360 &#8211; $210, we find our fixed cost value of $150. This is no surprise \u2013 producer surplus is just our earnings before we subtract the fixed costs!<\/span><\/p>\n<h2>When There&#8217;s Losses<\/h2>\n<p style=\"vertical-align: baseline;margin: 0cm 0cm 11.25pt 0cm\"><span style=\"font-family: Georgia;color: black\">In the last example, The Clip Joint made healthy profits of $210 per day because P &gt; ATC. In the long run, this will not be sustainable. In fact, firms will produce in the short-run even when P &lt; ATC and \u03a0 is negative. Consider how The Clip Joint will behave when P = $5.<\/span><\/p>\n<p style=\"vertical-align: baseline;margin: 0cm 0cm 12.0pt 0cm\"><span style=\"font-family: Georgia;color: black\">At P = $5, MC = MB when Q = 90. This means ATC = $5.5 and AVC = $3.83.<\/span><\/p>\n<figure id=\"attachment_1950\" aria-describedby=\"caption-attachment-1950\" style=\"width: 535px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.10.05-PM.png\" width=\"535\" height=\"427\" class=\"wp-image-1950 size-full\" alt=\"\" srcset=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.10.05-PM.png 535w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.10.05-PM-300x239.png 300w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.10.05-PM-65x52.png 65w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.10.05-PM-225x180.png 225w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.10.05-PM-350x279.png 350w\" sizes=\"auto, (max-width: 535px) 100vw, 535px\" \/><figcaption id=\"caption-attachment-1950\" class=\"wp-caption-text\">Figure 7.2e<\/figcaption><\/figure>\n<p>Calculating profits, with \u03a0 = (P \u2013 ATC) \u00d7 Q, we find \u03a0 = (5.0 \u2013 5.5) x 90 = -$45.<\/p>\n<p>Why doesn\u2019t the firm just shut down if it is losing money? Because it could be losing <strong>more<\/strong> money. Remember that no matter how much The Clip Joint produces, it still has to pay $150 in fixed costs. In this case, The Clip Joint will take a loss of $45 over a loss of $150.<\/p>\n<p>We can come to the same conclusion by looking at producer surplus.<\/p>\n<figure id=\"attachment_1951\" aria-describedby=\"caption-attachment-1951\" style=\"width: 538px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.10.14-PM.png\" width=\"538\" height=\"440\" class=\"wp-image-1951 size-full\" alt=\"\" srcset=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.10.14-PM.png 538w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.10.14-PM-300x245.png 300w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.10.14-PM-65x53.png 65w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.10.14-PM-225x184.png 225w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.10.14-PM-350x286.png 350w\" sizes=\"auto, (max-width: 538px) 100vw, 538px\" \/><figcaption id=\"caption-attachment-1951\" class=\"wp-caption-text\">Figure 7.3f<\/figcaption><\/figure>\n<p>If PS &gt; 0, then the firm has enough money to pay for all of its variable costs, plus some money left over to pay for its fixed costs. In this case, after paying VC, The Clip Joint has $105 left over to pay off a portion of its fixed costs.<\/p>\n<p>This should clear up the relationship between FC, PS, and Profits. Producer Surplus is the amount we have before paying our fixed costs.<\/p>\n<p>Smart-thinking company presidents do not continue to accept loses in the long run \u2013 that would be bad business. When the lease comes up for renewal, The Clip Joint will shut down knowing that it loses $45 from each day of business. Is there any case where it would shut down immediately in the short run? Yes. In this example, our PS &gt; 0 since P &gt; AVC; this means that even though we are losing money, we are able to pay off some of our FC. What if P &lt; AVC? In this case, our firm would not even be able to pay for its workers, let alone rent and other fixed costs. The more the firm produced, the more money it would lose. In this case, our firm will shut down immediately. For this reason, we call the point where P = AVC<sub>MIN<\/sub>\u00a0the\u00a0<strong>Shut-Down Point<\/strong><strong>. <\/strong>If the price falls any lower, the firm will shut down immediately.<\/p>\n<figure id=\"attachment_1952\" aria-describedby=\"caption-attachment-1952\" style=\"width: 573px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.10.34-PM.png\" width=\"573\" height=\"418\" class=\"wp-image-1952 size-full\" alt=\"\" srcset=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.10.34-PM.png 573w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.10.34-PM-300x219.png 300w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.10.34-PM-65x47.png 65w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.10.34-PM-225x164.png 225w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-03-26-at-12.10.34-PM-350x255.png 350w\" sizes=\"auto, (max-width: 573px) 100vw, 573px\" \/><figcaption id=\"caption-attachment-1952\" class=\"wp-caption-text\">Figure 7.2g<\/figcaption><\/figure>\n<p>Another important point is the\u00a0<strong>Break-Even Point<\/strong>\u00a0where P = ATC. If the price falls below this, we reach a situation like the example above, where the firm makes negative profits but continues to operate in the short-run.<\/p>\n<p>We have now analyzed how an individual firm behaves in the short-run in depth \u2013 but what about the long run? What happens when shocks to the economy cause price to change? We will answer these questions in Topic 7.3.<\/p>\n<div class=\"textbox\">\n<h2>Glossary<\/h2>\n<dl id=\"fs-idp41787328\" class=\"definition\">\n<dt><strong>Break-Even Point<\/strong><\/dt>\n<dd id=\"fs-idp35020496\"><em>A point where a firm is making no profits<\/em><\/dd>\n<\/dl>\n<dl id=\"fs-idm51600048\" class=\"definition\">\n<dt><strong>Shut-Down Point<\/strong><\/dt>\n<dd id=\"fs-idp17805888\"><em>A point where a firm is only able to cover their variable costs of production<\/em><\/dd>\n<\/dl>\n<\/div>\n<div class=\"bcc-box bcc-info\">\n<h3 itemprop=\"educationalUse\">Exercises 7.2<\/h3>\n<p><strong>1.<\/strong> Suppose you are given the following information about a competitive firm:<\/p>\n<p>At the current quantity produced, P = $10; AVC = $4; AVC is at is minimum.<\/p>\n<p>Given this:<\/p>\n<p>a) The firm should continue to produce its current level of output; this is profit maximizing.<br \/>\nb) In order to maximize profits, the firm should increase output.<br \/>\nc) In order to maximize profits, the firm should decrease output.<br \/>\nd) We do not have enough information to determine what the firm should do to maximize profits.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>2.<\/strong> If a firm\u2019s profit equals $600 and its producer surplus equals $1,000, then its fixed costs:<\/p>\n<p>a) Equal $400<br \/>\nb) Equal $600.<br \/>\nc) Equal $1,600.<br \/>\nd) Cannot be determined without further information.<\/p>\n<p>&nbsp;<\/p>\n<p>The following TWO\u00a0questions refer to the diagram below. Assume perfect competition.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-02-13-at-3.43.01-PM.png\" alt=\"\" width=\"492\" height=\"381\" class=\"alignnone size-full wp-image-1339\" srcset=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-02-13-at-3.43.01-PM.png 492w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-02-13-at-3.43.01-PM-300x232.png 300w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-02-13-at-3.43.01-PM-65x50.png 65w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-02-13-at-3.43.01-PM-225x174.png 225w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-02-13-at-3.43.01-PM-350x271.png 350w\" sizes=\"auto, (max-width: 492px) 100vw, 492px\" \/><\/p>\n<p><strong>3.<\/strong> The firm\u2019s shut-down price is ____.<\/p>\n<p>a) $2.<br \/>\nb) $4.<br \/>\nc) $7.<br \/>\nd) $10.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>4.<\/strong> (Remember to refer to the diagram on the previous page.) The firm\u2019s break-even price is ____.<\/p>\n<p>a) $2.<br \/>\nb) $4.<br \/>\nc) $7.<br \/>\nd) $10.<\/p>\n<p>&nbsp;<\/p>\n<p>The following THREE questions refer to the diagram below, which illustrates a competitive firm\u2019s cost curves.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-02-13-at-3.49.33-PM.png\" alt=\"\" width=\"404\" height=\"284\" class=\"alignnone size-full wp-image-1340\" srcset=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-02-13-at-3.49.33-PM.png 404w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-02-13-at-3.49.33-PM-300x211.png 300w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-02-13-at-3.49.33-PM-65x46.png 65w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-02-13-at-3.49.33-PM-225x158.png 225w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-02-13-at-3.49.33-PM-350x246.png 350w\" sizes=\"auto, (max-width: 404px) 100vw, 404px\" \/><\/p>\n<p><strong>5.<\/strong> What do this firm\u2019s fixed costs equal?<\/p>\n<p>a) There is insufficient information to calculate the firm\u2019s fixed costs.<br \/>\nb) $50.<br \/>\nc) $30.<br \/>\nd) $20.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>6.<\/strong> (Remember to refer to the diagram on the previous page.) If this firm can sell its output for $10 per unit, then its maximum profit is equal to:<\/p>\n<p>a) $150.<br \/>\nb) $75.<br \/>\nc) $60.<br \/>\nd) $45.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>7.<\/strong> (Remember to refer to the diagram on the previous page.) If this firm can sell its output for $10 per unit, then its maximum producer surplus is equal to:<\/p>\n<p>a) $150.<br \/>\nb) $75.<br \/>\nc) $60.<br \/>\nd) $45.<\/p>\n<p>&nbsp;<\/p>\n<p>The following THREE\u00a0questions refer to the diagram below. Assume perfect competition.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-02-13-at-3.50.07-PM.png\" alt=\"\" width=\"305\" height=\"217\" class=\"alignnone size-full wp-image-1341\" srcset=\"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-02-13-at-3.50.07-PM.png 305w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-02-13-at-3.50.07-PM-300x213.png 300w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-02-13-at-3.50.07-PM-65x46.png 65w, https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-content\/uploads\/sites\/58\/2017\/02\/Screen-Shot-2017-02-13-at-3.50.07-PM-225x160.png 225w\" sizes=\"auto, (max-width: 305px) 100vw, 305px\" \/><\/p>\n<p><strong>8.<\/strong> Given a price of $18, the profit-maximizing level of output for this firm is:<\/p>\n<p>a) 5.<br \/>\nb) 25.<br \/>\nc) 30.<br \/>\nd) 40.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>9.<\/strong> (Remember to refer to the diagram on the previous page.) Given a price of $18, the firm\u2019s maximum profit is equal to:<\/p>\n<p>a) $360.<br \/>\nb) $240.<br \/>\nc) $180.<br \/>\nd) $0.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>10.<\/strong> (Remember to refer to the diagram on the previous page.) What do this firm\u2019s fixed costs equal?<\/p>\n<p>a) $0<br \/>\nb) $40.<br \/>\nc) $180.<br \/>\nd) There is insufficient information to calculate fixed costs.<\/p>\n<\/div>\n","protected":false},"author":58,"menu_order":3,"comment_status":"closed","ping_status":"closed","template":"","meta":{"pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-168","chapter","type-chapter","status-publish","hentry"],"part":29,"_links":{"self":[{"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/pressbooks\/v2\/chapters\/168","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/wp\/v2\/users\/58"}],"replies":[{"embeddable":true,"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/wp\/v2\/comments?post=168"}],"version-history":[{"count":19,"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/pressbooks\/v2\/chapters\/168\/revisions"}],"predecessor-version":[{"id":2335,"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/pressbooks\/v2\/chapters\/168\/revisions\/2335"}],"part":[{"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/pressbooks\/v2\/parts\/29"}],"metadata":[{"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/pressbooks\/v2\/chapters\/168\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/wp\/v2\/media?parent=168"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/pressbooks\/v2\/chapter-type?post=168"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/wp\/v2\/contributor?post=168"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/wp\/v2\/license?post=168"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}